The Friday Post-Dispatch ran a wire story with the headline: “Firms promising to help indebted consumers really hurt, U.S. inquiry finds”.
A new report by undercover government investigators bolsters long-standing concerns that companies promising to help consumers overwhelmed by credit card and other debts often turn out to be financial predators who charge high fees but deliver little or nothing in return.
When investigators for the Government Accountability Office posed as distressed consumers seeking help, so-called debt management companies gave them wildly exaggerated descriptions of the firms’ success rates and sometimes promised savings of as much as 50 cents on the dollar, Gregory Kutz, the GAO official who ran the investigation, told Congress on Thursday.
But after paying big up-front fees – often running to several thousand dollars – many consumers end up deeper in debt than they were before seeking help, Kutz said.
Claire McCaskill put a representative of the trade organization for these scumbags on the hot seat in a hearing Thursday–though, of course, she wouldn’t stoop to using a prejudicial word like “scumbag.” No need to. The facts were enough. Though her voice was level, it still sometimes vibrated with indignation.
You have to understand that the premise of the business is offensive … um, in this way: the premise is that when people are in debt and worried, they are more easily persuaded that someone can help them, because they’re desperate for help. And when someone tells them, “You don’t have to pay your bills anymore, and we’re gonna make a lot of your bills go away, that is like asking a five year old if they wanta get a Happy Meal. It is equivalent to that. And what is hard for me to understand is how your association thinks you can stop the inevitable march of regulation, lawsuits, enforcement actions. Because I don’t think you can produce statistics that show that you’re helping anyone. I have prepared for this hearing. I’m not aware of any statistics that show that you’ve helped anyone. In fact, and let me ask Mr. Lehman this, it’s my understanding, Mr. Lehman, that one of the problems in these lawsuits that are being brought by the attorneys general is the fights over discovery, that it has been very difficult to get the documents, to get the data, to be able to make sure that every fact is uncovered so that first the members of Mr. Ansbach’s organization have due process, but most importantly, if, whether or not these are civil cases for consumer action or whether or not these are fraud cases.
You are preying upon the fears of people. You’re making a lot of money, and you’re delivering a substandard product. And many, many times you are engaging in fraud to get the customers by promising them something that you know is not true–that they can quit paying their bills, that you’re gonna settle the debts, and your record of success and you have so few dropouts … and on and on and on.
She finally punched Ansbach with a velvet glove:
If [the attorneys general] have to keep fighting for discovery, I think the United States Congress is going to have their back. So I think the word needs to go out. If you can prove what you say, I suggest you get to provin’ it.